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DECREE No

DECREE No.42-CP OF JULY 16, 1996 OF THE GOVERNMENT PROMULGATING THE REGULATION ON THE MANAGEMENT OF INVESTMENT AND CONSTRUCTION

THE GOVERNMENT

Pursuant to the Law on Organization of the Government of September 30, 1992;

At the proposals of the Minister of Construction, the Minister of Finance and the Minister of Planning and Investment,

DECREES:

Article 1.- To issue together with this Decree the Regulation on the Management of Investment and Construction in replacement of the Regulation on the Management of Investment and Construction issued together with Decree No.177-CP of October 20, 1994.

Article 2.- This Decree takes effect from the date of its signing.

Article 3.- The Minister of Construction shall preside over the coordination with the Ministry of Finance, the Ministry of Planning and Investment and the concerned Ministries and branches in guiding and supervising the implementation of the Regulation on the Management of Investment and Construction issued together with this Decree.

Article 4.- The Ministers, the Heads of the ministerial-level agencies, the agencies attached to the Government, the Presidents of the People�s Committees of the provinces and the cities directly under the Central Government and the Managing Boards of the State Corporations shall have to implement this Decree.

On behalf of the Government

The Prime Minister

VO VAN KIET

REGULATION ON THE MANAGEMENT OF INVESTMENT AND CONSTRUCTION
(issued together with Decree No.42-CP of July 16, 1996 of the Government on amendments and supplements to Decree No.177-CP)

Chapter 1

GENERAL PROVISIONS

Article 1.- Interpretation of terms:

In this Regulation, the following terms shall be construed as follows:

1. "Management of Investment and Construction" means the State management over the investment and construction process from the determination of the project of investment to the putting of the project into operation or use to achieve the set objective.

2. "Investment project" means an assortment of proposals concerning the disbursement of capital to create, expand or renovate a given number of installations in order to increase the quantity or improve or raise the quality of some products or services within a given period.

3. "Construction project" is a product of the construction and installation technology associated with land (including water surface, sea surface and continental shelf) which is made of construction materials and with the use of equipment and labor.

A construction project may consist of one or more installations in a complete and assorted technological line (along with production cooperation) in order to turn out the end-product stated in the project.

4. "State capital" is the capital under or originating from the ownership of the entire people under unified State management and in accordance with law.

5. "Ministry in charge of a branch" is the Ministry, the ministerial-level agency or the agency attached to the Government having the function of managing a certain branch throughout the country in accordance with the provisions of the Law on Organization of the Government.

6. "Agency competent to decide the investment" is a State organization or State agency assigned or empowered by the Government to decide the investment in accordance with the provisions in Article 7 of this Regulation.

7. "Investor" is an individual or an organization with legal person status which has the responsibility to directly manage and use the invested capital in accordance with the provisions of law.

- With regard to investment projects using State capital or projects in which the State holds the predominant share or a special share, the investor shall be a State enterprise (corporation, company), a State agency, a political organization, a socio-political organization or a project management organization, entrusted by the agency competent to decide the investment with the responsibility of directly managing and using the investment capital.

- With regard to investment projects of limited liability companies, stock companies or cooperatives, the investor shall be the company or the cooperative.

- With regard to investment projects of individuals, the investor shall be the owner of the capital.

- With regard to foreign direct investment projects, the investor shall be the parties to a business cooperation project (such as a business cooperation contract); the Managing Board (such as a joint-venture enterprise); the foreign organization or individual foreigner that owns all the investment capital (such as an enterprise with 100% of foreign investment capital and BOT project).

8. "Total investment" is the maximum expenditure allowed by the agency competent to decide the investment for the investor to select from optional plans for carrying out the investment project.

9. "Total cost estimate of the project" is the total expenditure needed to build the planned project which is concretely calculated in the phase of technical designing. The total cost estimate of the project comprises expenditures related to the survey, designing, construction and installation, purchase of equipment, expenditures on the use of land, compensations and ground clearance, reserve and other expenditures.

10. "Investment capital to be settled" is the whole of lawful expenditures already made in the process of investment for putting the project into operation or use. Lawful expenditures are those made in accordance with the signed contract and the State accounting regime and audited at the request of the agency competent to decide the investment.

11. "Construction criteria" are the technical criteria set for carrying out the survey, designing, installation and construction, test operation on completion to ensure the quality of the project. They differ from one branch of construction to another and are issued by the State or the Ministries in charge of specialized construction services.

12. "Construction norms" are the documents defining the minimum technical requirements which are compulsory to all construction activities as well as construction and construction criteria to be used so as to meet those requirements. They are issued solely by the Ministry of Construction.

Article 2.- Fundamental requirements for the management of investment and construction.

The management of investment and construction aims to:

1. Ensure the achievement of the objectives of the socio-economic development strategies in each period along the socialist orientation, re-orientate the economic structure along the direction of industrialization and modernization, speed up the economic growth rate and improve the material and cultural life of the people.

2. Mobilize and make the most effective use of investment capital from both domestic and foreign sources in Vietnam; properly exploit the natural resources, labor, land and all other resources while protecting the ecological environment, combating all acts of corruption and wastefulness in investment and construction activities.

3. Carry out the constructions in accordance with the approved general plan, architecture and technical design so as to ensure their durability and the beauty of landscapes. Allow competition in the construction to induce the application of advanced construction technology, to ensure the construction quality and schedule at reasonable costs and provide warranty for the construction.

Article 3.- Fundamental principles in the management of investment and construction

1. The State exercises unified management of investment and construction over all economic sectors in terms of the objectives of the socio-economic development strategies; general planning and branch and territorial development planning; general zoning and urban and rural construction plans; construction norms and criteria; selection of technology, use of land, natural resources, protection of the ecological environment; technical design, architecture, construction and installation, insurance and construction warranty and other social aspects of the project.

For investment projects using State capital, the State also performs its management over the business, finance and economic efficiency of the project.

2. The order of construction and investment must be strictly observed.

3. A clear distinction must be made between the function of State management and that of production and business management. The responsibilities of the State management agencies, the investor, the consultancy organizations, the construction enterprises and the material and equipment supply businesses must be clearly defined during the course of investment and construction.

Article 4.- Order of investment and construction:

Investment and construction shall be effected in three stages:

1. Preparation for investment

2. Implementation of investment

3. Completion of construction and putting the project into operation or use.

Article 5.- Classification of investment projects:

Depending on their form, nature and scale, the domestic investment projects are divided into 3 groups: A, B and C. The characteristics of each group are defined in the Appendix attached to this Regulation. The projects with foreign direct investments are classified according to the current stipulations of the State.

Article 6.- The responsibility for State management over the investment and construction.

1. The Ministry of Planning and Investment:

The Ministry of Planning and Investment shall have to study and develop the mechanism and policies on economic management and State management of domestic and foreign investment in Vietnam; identify the orientation and structure for inviting foreign investment in Vietnam and ensuring the balance between domestic investment and foreign investment then submit them to the Government for decision. The Ministry shall submit to the Government draft laws, ordinances and legal documents concerning the mechanism and policies on economic management and promotion of domestic and foreign investment with a view to achieving an economic structure suited to the strategy, planning and plans for socio-economic stabilization and development. It shall issue investment permits and provide guidance for enterprises with foreign investment capital to make preparations for investment in accordance with the Law on Foreign Investment in Vietnam and relevant provisions of this Regulation. It shall, within its jurisdiction, organize the evaluation of the investment projects in Group A and submit them to the Prime Minister for consideration and decision; synthetize and submit to the Prime Minister annual and five-year development investment plans; coordinate with the Ministry of Finance in examining and supervising the implementation of investment plans funded by the capital under State management; ensure the necessary factors to carry out the plan of putting the results of investment into operation part by part. It shall also preside over the coordination with the Ministry of Construction and the Ministry of Trade as well as other Ministries, branches and localities in guiding and supervising the implementation of the Regulation on Bidding.

2. The Ministry of Construction:

The Ministry of Construction shall study and work out the mechanism and policies on the management of construction as well as the urban and rural construction plan, then submit them to the Prime Minister for approval and promulgation or it may be empowered by the Prime Minister to promulgate them; issue or let the Ministries in charge of specialized construction issue the standards, rules and regulations on the management of the project quality and construction economics (a system of economic and technical norms and indice in construction, standard prices and construction unit price). It shall evaluate the total cost estimates of projects in Group A for approval by the Ministry in charge of the branch; exercise unified State management of the quality of construction projects and the issuing of qualification certificates in consultancy businesses in construction and installation. The Ministry of Construction shall preside over and coordinate with the Ministry of Planning and Investment, the Ministry of Finance and other Ministries, branches and localities in guiding and supervising the implementation of the Regulation on the Management of Investment and Construction.

3. The Ministry of Finance:

The Ministry of Finance shall perform the function of State management over financial matters in the field of development investment; study and develop the policies and regimes on the management of investment capital and promulgate them within its jurisdiction or submit them to the Prime Minister for promulgation. On the basis of national socio-economic development plans and the major balances of the national economy, it shall, in coordination with the Ministry of Planning and Investment, elaborate the plan for allocating development investment capital to the Ministries, localities and important projects of the State. It shall exercise unified management of foreign loans and aid of the Government allocated for development investment; inspect and examine financial matters in the organizations and establishments utilizing State investment capital, guide and examine the use of such capital.

The General Department of Development Investment has the task of assisting the Minister of Finance in organizing the allocation of investment capital, granting and recovery of preferential credits of the State (including foreign loans and aid of the Government for development investment) with regard to the projects, objectives and programs under the investment plan and the instruction of the Prime Minister.

4. The State Bank of Vietnam:

The State Bank of Vietnam shall study the mechanisms and policies on State management of currencies and bank credits in investment and construction and submit them to the Prime Minister for promulgation or it may be empowered by the Prime Minister to promulgate them. It shall guide the Investment and Development Bank, commercial banks and other financial and credit organizations in mobilizing capital from various sources in the country and abroad to provide long-term and mid-term loans for projects and short-term loans in service of development investment, production and business; assure the regime of security of bidding participation and security of contractual performance by Vietnamese contractors when they participate in international bidding in accordance with the regulations of the Prime Minister. The banks shall themselves decide the loans from the mobilized capital and recovery of debts at market interest rates.

5. Ministries in charge of concerned branches:

- The Ministries in charge of different branches relating to land, natural resources, technology, environment, trade, the maintenance and conservation of historical relics, cultural heritage and picturesque landscapes, national defense, security, fire prevention and combat, shall examine and make written recommendations on relevant issues of the investment projects within 20 days after receiving of the written request from the agency competent to decide the investment and permission of investment in the project. Within 20 days, if there is no reply from the concerned Ministries, it shall be deemed that these Ministries have consented to the written request.

- The concerned Ministries shall provide concrete guidance for the implementation of the mechanisms and policies on the branch development investment and on the State management of investment projects in the branch and, at the same time, are entitled to propose the suspension of any investment and construction activity which contravenes the regulation under their State management authority.

- The Ministries in charge of specialized construction services (the Ministry of Construction with regard to industrial or civil project construction; the Ministry of Transport and Communications with regard to the construction of communications and transport projects; the Ministry of Industry with regard to the construction of mines, power transmission and transformation projects; the Ministry of Agriculture and Rural Development with regard to the construction of water works, agricultural and forestry projects; the General Department of Post with regard to the construction of postal projects) shall provide detailed guidance for the implementation of the construction mechanisms and policies suited to the characteristics of each specialized service; study and issue, within the responsibilities assigned by the Government, the technical norms, procedures and rules in construction; work out the specialized economic and technical norms and issue them after obtaining the consent from the Ministry of Construction.

6. The People�s Committees of the provinces and cities directly under the Central Government.

The People�s Committees of the provinces and cities directly under the Central Government shall, within their functions, powers and tasks stipulated by law and the assignment of responsibilities by the Government and State management agencies at the central level, have to exercise the State management over all organizations and individuals that are carrying out investment projects in their respective territories in accordance with the provisions of law.

Article 7.- Competence to decide the investment, permit the investment and grant investment licenses.

1. Competence to decide investment in projects using State capital.

a) The Prime Minister shall decide the investment in the projects of Group A.

b) The Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government, the People�s Committees of the provinces and cities directly under the Central Government shall decide the investment in projects of Groups B and C. In particular, for the projects of Group B, prior to any decision on the investment, consent must be sought from the Minister of Planning and Investment to the investment plan and from the Minister in charge of the branch to the general planning for the branch development and the economic and technical norms of the project.

c) The Minister of Planning and Investment shall decide the investment in the ODA projects capitalized at under 1.5 million USD (excluding the capital from domestic sources).

d) The General Departments and the Departments under the Ministries shall, as empowered by the Ministers, decide the investment in the projects of Group C.

e) The Managing Boards of the Corporations established under Decision No.91-TTg of March 7, 1994 of the Prime Minister may decide the investment in Group-B projects capitalized at less than 50% of the capital level of the Group B projects specified in the appendix on the classification of investment projects attached to this Regulation and to decide the investment in the projects of Group C. Any special case outside the above stipulation must be approved by the Prime Minister. In particular, with regard to projects of Group B, before a decision on the investment is made, Point 1 - b of this Article shall be observed.

f) The Managing Boards of the Corporations established under Decision No.90-TTg of March 7, 1994 of the Prime Minister are entitled to decide the investment in projects of Group C.

g) The Presidents of the People�s Committees of Hanoi and Ho Chi Minh cities shall may empower the Presidents of the district People�s Committees to decide the investment in the projects capitalized at less than 2 billion VND, depending on the specific conditions of each city. For other provinces and cities, the Presidents of the provincial/municipal People�s Committees may empower the Presidents of the district People�s Committees to decide the investment in the projects capitalized at less than 500 million VND, depending on the specific conditions of each locality.

2. Competence to permit the investment and grant investment licenses to domestic projects not using the State capital.

a) The Minister of Planning and Investment shall grant investment licenses to the projects of Group A if the Prime Minister permits the investment.

b) The Presidents of the People�s Committees of the provinces and cities directly under the Central Government shall permit and, at the same time, grant investment licenses to projects of Group B with approval from the Minister in charge of the branch.

c) The provincial/municipal Planning and Investment Services shall grant investment licenses to projects of Group C if permission for investment is gotten from the Presidents of the People�s Committees of the provinces and cities directly under the Central Government.

3. For the projects with foreign direct investment, the Law on Foreign Investment in Vietnam shall apply.

Article 8.- Responsibilities of the investors and the construction consultancy organizations, equipment suppliers and construction and installation organizations.

1. Responsibilities of the investor:

a) The investor shall have to organize the execution of the investment project contracted in accordance with the current law.

b) The investor may use capital of different sources as prescribed by this Regulation in order to draw up the project and shall take the responsibility for the overall and uninterrupted management of the utilization of the investment capital sources right from the time the project is drawn up till it is completed and put into operation in accordance with the requirements set in the approved project.

c) The investor shall have to repay the loans as well as the mobilized capital on schedule and in conformity with other commitments made during the capital mobilization.

d) In case of the change of the investor, the successor shall have to take over the whole investment work from his predecessor.

e) If the investor is a business in any form of ownership and goes bankrupt, the investment work already done by it shall be dealt with in accordance with the Law on Bankruptcy.

f) When compiling the dossier on the pre-feasibility and feasibility studies, the investor shall have the duty and right to request the concerned State agencies to give guidance on questions related to the project such as on land, natural resources, water and electricity supply, transport and communications, ecological environment, prevention and combat against fires and explosion, protection of historical and cultural relics, defense and security. The investor shall also have to observe all the State stipulations on the above-mentioned issues in the course of investment and construction.

2. The investment and construction consultancy organizations (survey, designing, management, project implementation...), the suppliers of equipment and materials and the organization engaged in construction and installation shall have to fully perform the contract signed with the investor or the project manager and shall be accountable before law for the result of the contract performance.

Article 9.- Principles on the management of the use of the development investment capital sources.

1. The State budgetary capital used for development investment under the State plan includes:

- The capital for the investment projects to construct social, economic, defense and security infrastructure works with unretrievable capital, shall be managed according to the division of responsibilities in State budget spending on development investment.

- The investment and capital given as support to State enterprises, stock capital or capital contributed to joint-ventures in areas that need the participation of the State as prescribed by law.

- Allocations to the national investment support fund and the development support funds for economic development programs and projects (from the central budget).

2. The State preferential credits shall be used to invest in the projects to construct economic infrastructure, job generating production establishments, important investment projects of the State in each period of development (power, cement, iron and steel, water supply and drainage...) and a number of other projects in various branches with retrievable capital as stated in the State plan. The Government shall decide details of the investment for each of these projects during the plan execution.

3. The capital from the sources of foreign loans of the Government and the international aid earmarked for development investment, including the official development assistance (ODA), shall be placed under the unified management as prescribed in point b, item 2, Article 21 of the Law on the State Budget and the documents guiding the implementation of this Law.

4. The capital from the national investment support fund and other State funds shall be used for development investment.

5. The capital from commercial credits shall be used to invest in new construction, renovation, expansion, technical and technological renewal projects on the effective production, business and services with their recoverable capital and eligibility for loans according to the regulations currently in force. The regime of self-procurement and self-repayment shall apply to the capital from commercial credits and all the investment procedures and conditions for capital borrowing and repayment shall be strictly observed.

6. The investment capital of State enterprises (basic depreciation capital, capital accumulated from after-tax profits, self-mobilized capital) used for production and business development and the improvement of product quality and competitiveness must be used strictly in accordance with current regimes of management of investment capital by such enterprises. The organization managing the enterprise shall also have to perform close supervision so as to ensure that the capital be used effectively for the right purpose.

7. The capital of State enterprises in a cooperative venture or joint venture with foreign partners.

Where a State enterprise is allowed to contribute capital to a joint venture with foreign partners in the form of land-use right or the rent of land, water surface, sea surface, workshops, equipment and other constructions belonging to the State capital, it must get permission from the competent level and fill the procedures to receive the capital and has the responsibility to return the capital to the State according to current regulations.

8. The capital mobilized by the administrations at the provincial and district levels from the contributions of organizations and individuals shall be used to construct infrastructure projects provided for by the Government.

The capital mobilized by the administration at the commune/township level from the contributions of organizations and individuals shall be used to construct infrastructure projects in the commune or township on the principle of voluntariness.

These sources of capital must be managed openly, examined and supervised to ensure that they are used for the right purpose and in accordance with the regime prescribed by law.

9. With regard to the investment capital of non-State economic organizations and the investment capital of individual citizens, the investor must complete all procedures before submitting them to the competent agency for consideration and granting of business or construction permits.

10. The management of foreign direct investment capital shall be performed according to Government stipulations.

11. The investment capital of diplomatic missions, international organizations and other foreign agencies which are allowed to erect buildings on Vietnamese land shall be managed in accordance with the treaties or agreements signed between the Vietnamese Government and the governments of the concerned countries or with the concerned foreign organizations and agencies.

12. One investment project may use different sources of capital but not in contravention of the stipulations on the use of capital in this Regulation. The use of the administrative and non-business capital for investment in new constructions, except for the infrastructure works under the national programs defined by the Government is prohibited. No branches or localities are allowed to transfer on their own initiative the capital allocated or loaned under plan from one project to another without the permission of the Prime Minister.

Article 10.- Planning of investment.

1. The planning of investment at all levels must cover all sources of investment capital:

- The investment plan at the macro level must take into account the balance of investments for the whole society, including: investment capital from the State budget, investment credits, investment capital of State enterprises (the basic depreciation capital, the capital accumulated from after-tax profits and the mobilized capital), investment capital of the people and of private businesses and foreign direct investments.

- The investment plan at the provincial/municipal level must take into account, cover and monitor all the investment activities of various economic sectors, including the investment capital directly managed by the locality; and, at the same time, provide guidance for the administration of the lower levels to calculate and balance the sources of development investment capital (including the mobilized capital, budgetary revenues left for the locality and subsidies from the higher level).

- The investment plan of enterprises must balance and cover the sources of basic depreciation capital, capital accumulated from after-tax profits, capital mobilized from domestic and foreign sources, State credits, and budgetary subsidies (if any).

- The State planning agencies of all levels shall take responsibility for directly planning the State capital.

2. Implementing the investment plans according to the approved programs and projects:

a) For investment projects using State capital, the total investment shall be approved for the whole project.

b) The list of national programs shall be decided by the National Assembly and their objectives, implementation tempo, total capital level and sources of capital shall be approved by the Prime Minister, which will serve as basis for drawing up plans for the Ministries and localities. The investment and construction projects using State capital in the national programs must be implemented in accordance with this Regulation.

3. The capital for the branch and territorial planning and urban and rural construction planning must be recorded in the State plan. The Ministries of Planning and Investment, Construction and Finance shall provide detailed guidance on the planning of this capital.

4. The construction-related administrative and non-business capital shall be used to invest in national programs. The Ministry of Finance shall consult with the Ministry of Planning and Investment in mapping out plans which shall be then notified to the different ministries, the provinces and the cities directly under the Central Government for implementation on the basis of the plan, annual State budget estimate with detailed estimates of units using State budget, which have been approved by the competent level.

5. The contents of, and conditions for registering, the investment plan and the reporting on the situation of implementing the plan are defined as follows:

a) The contents of the investment plan include:

- The plan of capital for the survey and prospecting, for branch and territorial planning, and for urban and rural construction planning.

- The plan on preparations for investment includes the investment capital for conducting the prospection and survey, making the pre-feasibility and feasibility studies, evaluating the project and deciding the investment.

- The plan on preparations for the project implementation includes the capital for conducting the survey and technical designing, elaborating the total estimate of expenditures, compiling the dossier for bidding invitation, building the auxiliary constructions, the temporary dwellings for construction workers, if required by the project and permitted by the competent level, and expenditures on the preparation for the implementation of other related projects.

- The project implementation plan includes the investment capital for the purchase of equipment and materials, construction and other expenditures related to the putting of the project into operation or use.

b) Conditions for registration in the annual investment plan:

- The projects to be recorded in the plan prepared for investment must be included in the branch and territorial development planning.

- The projects to be recorded in the plan prepared for implementation must be provided with the investment decisions conforming to the provisions of this Regulation.

- The projects to be recorded in the project implementation plan must have the total cost estimate approved by the competent level.

Projects of Group A or B, which have no technical design and approved total cost estimate but have the capital level for each part of the project defined in their investment decision and have the technical design and cost estimate for the first stage of the project approved by the competent level, shall be recorded in the investment plan.

For a project signed with foreign partners and comprising several sub-projects, each sub-project which is to be carried out in the year must have its technical design and cost estimate approved by the competent level.

3. Reporting on the situation of the plan implementation:

The Ministries, the ministerial-level agencies, the agencies attached to the Government, the Corporations established under Decision No.91-TTg of March 7, 1994 of the Prime Minister, the provinces and the cities directly under the Central Government shall report on the situation of the plan implementation every quarter, six months, nine months and year within the first week of the last month of a quarter to the Ministry of Planning and Investment, the Ministry of Finance, the Ministry of Construction, the General Office of Statistics, regarding the mobilization of capital from various sources, construction volume, allocations and payment, completed projects and newly mobilized capabilities according to the model forms issued by the General Office of Statistics. For the projects of Group A alone, the investors must submit their reports on the implementation situation on the 25th day of every month so that the Ministry of Planning and Investment prepares a general report and submit it to the Prime Minister.

Chapter II

INVESTMENT PREPARATION

Article 11.- Investment preparation

The investment preparation includes:

1. Study of the necessity of investment and the investment scale.

2. Establishing contacts and exploring the market in the country and abroad in order to look for the source of materials and equipment supply or to market products. Examining the possibility of mobilizing capital from different sources for investment and choosing the form of investment.

3. Conducting survey, prospecting and selecting the site for construction.

4. Drawing up the investment project.

5. Evaluating the project to decide the investment.

Article 12.- Drawing up the investment project.

1. The drawing up of an investment project shall involve the following steps:

a) Determining the necessity of the investment project.

b) Carrying out pre-feasibility and feasibility studies.

2. With regard to the projects of Group A, two steps are required: pre-feasibility study and feasibility study. If the Prime Minister decides that the pre-feasibility study is not necessary the investor shall carry out only the feasibility study.

3. With regard to the projects of Group B, the agency competent to decide the investment shall decide whether it is necessary or not to carry out both steps: pre-feasibility study and feasibility study.

4. With regard to other projects, only the feasibility study is required.

Article 13.- Main contents of the report on the pre-feasibility study:

The main contents of the report on the pre-feasibility study include:

1. Preliminary study on the necessity of investment, favorable conditions and difficulties.

2. Projected scale of investment and selection of the form of investment.

3. Selection of the area and site for construction and estimated area of land to be used.

4. Preliminary analysis of technology, technique and construction, conditions for the supply of raw materials, materials, equipment, energy, services and infrastructure.

5. Financial analysis to preliminarily determine the total investment, the possibilities and conditions for mobilizing capital from various sources, the possibility of capital retrieval, debt payment and profit earning.

6. Preliminary estimate of the economic and social efficiency of the investment project.

Article 14.- Main contents of the report on the feasibility study.

The main contents of the report on the feasibility study include:

1. Bases for determining the necessity of investment.

2. Selection of the form of investment.

3. The production schedule and the conditions to be met.

4. Options for a particular site (or a system of constructions).

5. Analysis for the selection of the technological and technical option.

6. Construction options and solutions.

7. Organization for the management of labor.

8. Financial and economic analysis.

The details of the report on the pre-feasibility or the feasibility study shall be defined by the Ministry of Planning and Investment and the Ministry of Construction.

Article 15.- Requirements for the evaluation of investment projects.

1. All investment projects involving constructions regardless of their sources of capital and economic sectors must be evaluated in terms of construction planning, architectural plans, technology, the use of land and natural resources, protection of ecological environment, prevention and fight against fires and explosion as well as their social impacts.

2. The investment projects using State capital must be additionally evaluated in terms of their financial plans and economic efficiency.

3. The evaluation of the investment projects using ODA capital must conform to the State regulations as well as international practices.

Article 16.- Evaluation of investment projects.

The evaluation of investment projects are prescribed as follows:

1. The investor is responsible for drawing up the pre-feasibility and feasibility studies and submit them directly to the agency competent to decide the investment for approval.

2. The pre-feasibility study, approved in writing by the agency competent to decide the investment, shall serve as basis for drawing up the feasibility study or continuing the prospection, negotiation and signing of agreements between the partners before the feasibility study is made. The projects of Group A shall be considered and decided by the Prime Minister at the proposal of the Ministry of Planning and Investment and the Ministry in charge of the branch within 20 days from the date of receipt of the full and valid dossier.

3. Feasibility study:

- The projects of Group A: shall be evaluated by the Ministry of Planning and Investment, and the decisions on the investment therein shall be drafted by the Ministry of Planning and Investment, which is responsible for collecting comments from the concerned Ministries, branches and localities, then submitted to the Prime Minister for consideration and decision. Depending on the nature and necessity of each project, before making an investment decision, the Prime Minister may request the State Council for Evaluation of Investment Projects to study and comment.

- The projects of Groups B and C: Before making a decision to invest, the agency competent to decide the investment may ask its capable specialized agencies to choose a consulting organization to evaluate the project. (For the projects of Group B, there must be the consent of the Ministry of Planning and Investment and the Ministry in charge of the concerned branch as prescribed in Article 7).

4. The evaluation of foreign projects shall be done according to a specific regulation.

Article 17.- The State Council for Evaluation of Investment Projects.

The State Council for Evaluation of Investment Projects is established under the decision of the Prime Minister to advise the Prime Minister on the investment projects under his/her jurisdiction.

The council for evaluation of investment projects shall not be set up at other levels.

Article 18.- Time limit for the evaluation of a project.

1. With regard to the investment projects of Group A, the time limit for evaluation shall not exceed 45 days from the date of receipt of the full and valid dossier.

2. With regard to the investment projects of Group B, the time limit for evaluation shall not exceed 30 days from the date of receipt of the full and valid dossier.

3. With regard to the investment projects of Group C, the time limit for evaluation shall not exceed 20 days from the date of receipt of the full and valid dossier.

Article 19.- Investment decision and issuing of investment permit.

1. The investment project using State capital must have the investment decision issued by the competent agency before the investment is implemented .

The contents of the investment decision include:

a) Determination of the investor and the form of the management of the project.

b) Determination of the location and the land area to be used.

c) The designed capacity.

d) Total investment and mobilized capital.

e) Project implementation modes

f) Duration of construction and main time targets.

2. With regard to the investment project not using State capital, the investment permit shall be issued to the investor as prescribed in Article 7.

The contents of the investment permit are defined by the Ministry of Planning and Investment.

Article 20.- Change of the contents of the investment project.

1. Any change in the contents of an investment project must be approved in writing by the agency which has decided the investment project.

2. When the investor deems it necessary to change the contents of a project that has been granted an investment decision (or the investment permit) he/she must clearly state the reason and the proposed change and re-evaluation must be done so as to get a new investment decision or a new investment permit.

3. A project may be suspended or canceled in the following cases:

a) After 12 months from the date of receipt of the investment decision (or the investment permit), the investor still fails to start the project without the approval by the competent level;

b) The objective of the project is changed without the approval in writing of the agency competent to decide the investment;

c) The implementation of the project is prolonged for more than 12 months against the time targets set in the investment decision without any plausible reason.

Article 21.- Funds for the drawing up of the project and the evaluation of the project:

1. The funds for the drawing up and evaluation of a project shall be accounted for in the source of capital from which the project is funded. For a project with its source of capital not yet determined, the investor shall use his lawful capital or capital borrowed from banks for such jobs, which shall be refunded after the official source of capital is determined.

2. The fund for consultancy in the drawing up and evaluation of the project as prescribed in the investment capital of the project shall be stipulated by the Ministry of Construction after consulting the Ministry of Planning and Investment and the Ministry of Finance.

Chapter III

IMPLEMENTATION OF THE INVESTMENT PROJECT

Article 22.- The contents of the implementation of an investment project.

The contents of the implementation of an investment project include:

1. Application for the allocation or lease of land as prescribed by the State (including water surface, sea surface and continental shelf);

2. Preparing the ground for construction;

3. Organizing the selection of consultant in survey, designing, control of technical issues and project quality;

4. Evaluation of the project design;

5. Organizing bidding for the purchase of equipment, for construction and installation;

6. Applying for the construction permit and the permit for the exploitation of natural resources (if any);

7. Signing contracts with the contractors for the implementation of the project;

8. Construction and installation of the project;

9. Monitoring and supervising the execution of the contracts.

Article 23.- Assignment and receipt of land.

1. The investor who needs the use of land must compile a dossier to apply for land allocation or lease in accordance with the provisions of law.

2. The time limit for considering and settling an application for land allocation or lease and deciding to allocate land by the competent agency shall not exceed 25 days from the date of receipt of the full and valid dossier.

3. The assignment and receipt of the land at the site in preparation for the construction shall be done only after the investor has paid the tax on land use or the land rent, the land administration fee and completed the procedures for paying compensation for damage as prescribed by law. The granting of the land-use right certificate shall be done in accordance with the legislation on land.

Article 24.- Preparing the ground for construction:

1. The investor shall take the main responsibility for paying compensations and clearing the ground for construction before assigning the ground to the construction unit. The investor may sign a contract with a local organization specialized in compensation and ground clearance for performing this task.

2. The compensation and ground clearance shall be carried out in accordance with law. The local administrations of various levels shall have to create favorable conditions for the investor to level the ground for construction so as to ensure the project construction tempo.

Article 25.- Selection of the construction consultants.

The selection of construction consultants in the survey, designing, control of technical issues and project quality shall be done according to the State�s Regulation on Bidding.

Article 26.- Project designing.

1. Lawful documents used in designing.

The documents on the terrain, geological, hydrological and meteorological prospection and survey and other documents used in designing the construction of a project must be compiled by a specialized organization having the legal person status and meeting the construction criteria and technical norms for construction issued by the State. If foreign criteria and technical norms for construction are to be applied, the approval thereof must be given by the Ministry of Construction.

2. Order of designing

Depending on the technical complexity of the project, designing shall be done in one or two steps.

- For projects with high technical requirements and complicated geological and hydrological foundation, designing must be done in two steps: technical designing and construction blueprint designing.

- For projects with technical simplicity or with model designs or unsophisticated treatment of the foundation, only one-step designing is required: construction technique designing.

The designing organization must draw up the total cost estimate suited to the technical design or the construction technique design.

The contents of the dossier on step-by-step designing shall conform to the regulations issued by the Ministry of Construction.

Article 27.- Examination and approval of the technical design and the total cost estimate:

All the construction investment projects of all sources of capital and economic sectors must have their designs evaluated by specialized organizations before the commencement of construction.

1. With regard to construction investment projects using State capital:

- The technical designs and total cost estimates of Group-A projects shall be approved by the Head of the Ministry in charge of the branch after they are evaluated respectively by specialized organizations and the Ministry of Construction.

- The technical designs and the total cost estimates of the projects of Groups B and C shall be approved by the agency competent to decide the investment after the specialized organization evaluated the designs and the agencies in charge of construction evaluated the unit prices and the estimates. The agencies in charge of construction of the Corporations are the organizations which manage the construction investment of the Corporations. The agencies which manage the construction in the provinces and the cities directly under the Central Government are provincial/municipal Services for Specialized Construction.

2. For the projects with foreign direct investment, their designs shall be evaluated under separate instructions.

3. For the investment projects not using State capital eligible for construction permits the investors must hire consultancy organizations with legal person status to evaluate their technical designs.

Article 28.- The construction permit.

1. All the projects of new construction, renovation, repair and change of function or utility purpose in urban areas or in the land lots outside the cities must apply for a construction permit, except the following cases which are exempt from construction permits:

a) The constructions belonging to Group-A projects, which the Prime Minister has decided to invest in and of which the technical designs have been approved by the competent level. Yet, before starting the construction, the investor must send a dossier on the design of the project construction to the People�s Committee of the province or city where the project is located for supervision, monitoring and filing.

b) Minor repairs which do not affect the structures of adjacent houses and the street frontage as prescribed in Article 18 of Decree No.91-CP of August 17, 1994 of the Government on the management of urban planning.

2. Competence to issue construction permits:

a) The President of the People�s Committee of the province or city directly under the Central Government shall issue construction permits for the projects located on the territory under his/her management at the proposal of the Director of the provincial/municipal Construction Service or the chief architect (for the localities having chief architects).

The President of the People�s Committee of the province or city directly under the Central Government may empower the Director of the provincial/municipal Construction Service or the chief architect (for the localities having chief architects) to directly issue construction permits for the projects located in the territory under his/her management.

Once empowered to issue construction permits, the Director of the provincial/municipal Construction Service or the chief architect shall have to fulfill the administrative procedures as prescribed by law and to regularly report to the President of the People�s Committee of the province or city directly under the Central Government on the situation of the issuing of construction permits in his/her locality.

b) The President of the People�s Committee of the district, provincial town or city shall issue construction permits for single residential houses under private ownership and small-scale projects according to the assignment by the president of the People�s Committee of the province or the city directly under the Central Government. The issuing of construction permits for the projects of this group shall be subject to professional instruction of the Director of the provincial/municipal Construction Service or the chief architect (for the localities having chief architects).

Depending on the specific conditions of each locality, the Director of the provincial/municipal Construction Service or the chief architect (for the localities having chief architects) shall draw up the plan to issue construction permits, categorize and delineate areas and locations with projects to be granted construction permits for the President of the People�s Committee of the province or city directly under the Central Government to decide.

For Hanoi and Ho Chi Minh cities, the stipulation in the issuing of construction permits (including the categorization and delineation of areas for issuing construction permits) shall be promulgated by the President of the municipal People�s Committee after consulting with the Ministry of Construction.

c) The managing board of the export processing zone or the concentrated industrial park established by decision of the Prime Minister shall be entitled to issue construction permits for projects located within the boundaries of the processing zone or the industrial park in accordance with the provisions of law and the professional instruction of the Director of the provincial/municipal Construction Service or the chief architect (for the localities having chief architects).

3. The Ministry of Construction shall provide guidance for the procedure of issuing construction permits.

Article 29.- Permit to exploit natural resources.

Where an investment project requires the exploitation of natural resources, the investor must abide by all the provisions of the legislation on mineral resources.

Article 30.- Bidding and appointment of bidders.

1. All investment projects using State capital must be open for bidding according to the State regulation on bidding, except for the following projects for which bidders shall be appointed:

a) Research or experimental projects.

b) Emergency projects necessitated by natural calamities or acts of sabotage.

c) Projects of national secret, defense and security.

d) Projects valued at less than 500 million Vietnam Dong.

e) A number of special projects permitted by the Prime Minister.

2. Encouraging bidding for investment projects not using State capital and encouraging projects eligible for the appointment of bidders for the whole project or parts of the project when possible.

3. Before approving the plan for bidding of Group-B projects, if there is a bidding package worth more than 500 million Vietnam Dong where the bidder shall be appointed the agency competent to decide the investment in the project must report it to the Prime Minister for permission.

Article 31.- Contract on consultancy, purchase of equipment and construction and installation.

1. After receiving the written approval of the bidding results by the competent level, the investor shall have to negotiate and sign a contract with the winning bidder according to the State regulation on bidding. Where the contract is signed with foreign organizations, it must be submitted to the agency competent to decide the investment for approval.

2. Where the bidder is appointed, the investor must count himself on the approved design and cost estimate to negotiate and sign the contract according to the provisions of the legislation on contracts.

3. If the investor signs a contract at his/her own will, thus contravening the above-mentioned regulations, the capital-granting agency shall not give any capital or loan and he/she shall be disciplined according to the extent of the violation.

Article 32.- Conditions for starting a project.

All projects shall have to meet all the following conditions before being started:

a) Having a construction permit (for projects that require construction permits);

b) The projects using State capital must have their total cost estimate approved by the competent level. For a large-scale construction project with a long construction time and the total cost estimate not yet available, there must be a technical design and cost estimate approved for each period of construction or for each part of the project (such as ground leveling, auxiliary constructions, construction workers� dwellings, etc.) and must have its technical design and total cost estimate approved by the competent level not later than after one third of the value of the volume of the construction and installation work of the whole project has been completed, this estimate shall be used as basis for managing the expenditures on the project.

c) Having a proper bid assignment and acceptance contract.

Article 33.- Management of construction technique and quality.

1. The survey and designing organizations must assure close examination of details of each project. Every designing project must have a project manager who shall take personal responsibility before law for the project quality and efficiency. In implementing the regime of author�s supervision, the project manager shall closely coordinate with the investor and the construction business to settle in time all questions arising in the course of construction in order to ensure the quality of the project.

2. The construction businesses shall take responsibility before the investor for the construction and installation techniques and quality. The construction business must set up a section for technical and quality control in order to manage the construction and installation techniques and quality. Together with the investor, the designing organization and the supervising organization, it shall compile the dossier on test on completion and examine the quality of each work and each part of the project as well as the entire project.

3. The investor shall have to control or hire a consultancy organization to control the construction quality during the course of construction and installation.

4. The Ministry of Construction, in its capacity as an agency exercising the unified State management of the quality of construction projects, shall coordinate with the Ministries in charge of specialized construction services in issuing or assigning the responsibility for issuing the regulations on the management of the quality of specialized construction projects.

5. The provincial/municipal Construction Service, as the agency assisting the People�s Committee of the province or city directly under the Central Government in the exercise of unified State management of the quality of construction projects located on the territory of the province or city, shall have to coordinate with the provincial/municipal services in charge of specialized construction in guiding and organizing the State control, supervision and examination of the quality of construction project located on the territory of the province or city.

Article 34.- Test on completion of projects.

Testing on completion of projects shall be conducted phase by phase right after the completion of the hidden constructions, weight-bearing structures, parts or items of the construction as well as the whole project.

The investor shall have to organize the testing on completion of the project under the guidance of the Ministry of Construction.

With regard to a number of important projects or technically complicated projects, the agency competent to decide the investment shall set up a Council for test on completion to supervise and examine the test on completion by the investor at the proposal of the State Department for Examination of the Quality of Construction Projects under the Ministry of Construction.

Article 35.- Capital granting and payment.

1. For construction and installation bidding packages eligible for the application of the form of bidder appointment, the granting, lending and payment of the capital invested in construction and installation shall be made on the basis of the value of the work volume achieved and tested on completion every month, but they must be included in the annual plan for investment capital as well as in the approved total cost estimate.

For bidding packages with bidding applicable to the construction and installation, they shall receive a 10% - 20% advance of the total capital planned for the whole year, depending on the size and specific conditions of each bidding package and the payment of the investment capital shall be made according to the implementation tempo already defined in the annual plan.

2. With regard to the purchase of equipment (including imported and locally made equipment), capital shall be also provided in advance according to the current regime of payment and the terms of the contract between the investor and the supplier of equipment but such capital shall not exceed the approved total capital planned for the year.

3. The construction consultancy contracts shall be provided with an advance worth at least 25% of the contract value according to the total capital planned for the year.

4. The granting of construction-related administrative funds, the fund for territorial and branch planning, for urban and rural construction planning shall be made under the guidance of the Ministry of Finance and with the consent of the Ministry of Planning and Investment and the Ministry of Construction.

5. In the end year of the project (when the whole project or parts of the projects construction or construction items are completed), the capital-granting agency shall temporarily withhold 5% of the construction and installation value of the project in the plan year (the construction items completed) and shall disburse it right after the final balance of accounts is approved.

6. The capital granting agency shall not grant State budgetary capital and State preferential credits to pay for any damage or risk to those investors who did not buy insurance for construction projects.

Article 36.- Final balance of accounts.

1. Each year the investor shall have to report the investment capital already used to the capital granting or lending agency. On completion of the project (the whole project or parts thereof), the investor shall have to send a report on the final balance of accounts on the investment capital to the capital granting or lending agency and the agency which decided the investment.

2. If the investment project is funded by different sources of capital, each source must be stated clearly in the report.

3. With regard to investment projects whose construction takes several years, the investor, when making the final balance of accounts, must calculate the already used investment capital according to the prices prevailing at the time of the take-over and putting of the project into operation in order to determine the newly added value of the fixed assets and the value of the assets on take-over.

The Ministry of Construction shall provide guidance on the uniform method of calculating the prices at each period for the investors to apply when making the final balance of accounts.

4. No later than one month after the end of the plan-year, the investor shall have to complete the report on the investment capital already used in the previous year and send it to the capital granting or lending agency and the Ministry or the People�s Committee of the province or city directly under the Central Government.

No later than six months after the completed investment project is put into operation, the investor must complete the report on the final balance of accounts and send it to the capital-granting or -lending agency and the agencies having the function of examining the final balance of accounts under the Ministry or the province and the agency competent to approve the balance.

5. The Ministry of Finance shall provide guidance on the deadline for making the final balance of accounts, the contents of the report on the final balance, the contents of the examination and approval of the final balance of accounts of the projects using the State capital.

6. With regard to the investment projects in business cooperation or joint venture with foreign partners using State capital, upon the completion of the construction investment, they must be evaluated in terms of the equipment value and construction costs in order to determine the amount of capital contributed by the concerned partners as well as other obligations and rights of the business.

Article 37.- Examination and approval of the final balance of accounts.

1. The final balance of accounts of the investment capital of the completed project shall be examined before it is approved.

The Ministry of Finance shall preside over the examination regarding the projects of Group A.

The Ministries or the People�s Committees of the provinces and cities directly under the Central Government shall organize the examination in the other projects.

The financial agency shall have to examine and give its written comments on the final balance of accounts before the competent level approves it.

2. With regard to the completed investment project (the whole project or parts of the project) the agency competent to decide the investment shall also approve the final balance of accounts.

For the projects of Group A, the Prime Minister shall empower the Minister of Finance to approve their final balances of accounts.

With regard to the investment capital to be implemented each year, the capital-granting or-lending agency shall examine the used capital against the approved plan.

3. The expenditures on examination and approval of a final balance of accounts shall be covered by the investment capital of the project according to regulations of the Ministry of Finance.

Chapter IV

TERMINATION OF CONSTRUCTION AND PUTTING THE PROJECT INTO OPERATION OR USE

Article 38.- Contents of the work in the final stage of construction and putting the project into operation or use.

The contents of the work to be performed upon the termination of construction include:

1. Hand-over of the project.

2. Termination of construction.

3. Project warranty.

4. Operating the project.

Article 39.- Hand-over of the project.

1. The construction project shall be handed over wholly to the user only when the construction and installation have been completed according to the approved design and the quality of the construction is certified to meet the quality requirements upon test on completion (including the completion of the project�s interior and exterior decoration and the cleaning up of the ground).

2. The dossier on the completion of the project and other documents on issues related to the project must be handed over together with the project.

3. The dossiers on the project construction must be submitted and filed as archives in accordance with the legislation on State archives.

Article 40.- Termination of the construction.

1. The construction activities shall terminate when the whole project is handed over to the investor.

2. After handing over the project, the constructor must liquidate or move all his property out of the construction site and return the land borrowed or temporarily leased to service the project construction as contracted.

3. The obligations defined in the construction contract shall terminate completely only when the warranty period expires.

Article 41.- Project warranty.

1. The supplier of documents, survey data (including copies, drawings and tests) in service of the designing, construction and installation, test on completion, evaluation of the project, the manager of the design project, the contractor of the construction and installation, the supplier of construction equipment and materials and the construction supervisor must take full responsibility before law for the product quality or the results of their work.

2. The warranty period; the parties� rights and obligations concerning warranty; the procedure for performing these obligations and exercising these rights are stipulated by the competent State agency.

The Ministry of Construction shall set regulations on this issue for the products of the survey, designing, construction and installation of the project .

The Ministry of Science, Technology and Environment shall set regulations on this issue for various kinds of materials and equipment used as industrial products .

Article 42.- Operating the project.

After taking over the project, the investor shall have to tap and make use of the project�s capacity, organize production, trade and service in a synchronous way; and to perfect the managerial organization and modes with a view to bringing into full play the economic and technical norms set for the project.

Article 43.- Repaying the investment capital.

1. Retrieval of investment capital is compulsory for all investment projects capable of retrieving the capital.

2. With regard to projects invested with State budgetary capital; preferential credits, commercial credits and investment capital of businesses which the investors shall have to repay, the sources of capital to be retrieved and used for repaying the debts shall include all the basic depreciation, part of the profit and capital from other sources (if any).

Where the investor fails to retrieve the capital and repay all debts, he/she shall bear the responsibility as prescribed by law.

3. With regard to projects with capital borrowed directly by businesses from foreign countries and secured by the State, the businesses shall have to repay the debts according to the capital borrowing contract. If the businesses fail to repay the overdue debts, the securing agency shall have to repay the debts in their place and, at the same time, have the right to request the competent State agency to take necessary measures including auctioning the assets of businesses.

Chapter V

FORMS OF ORGANIZING THE MANAGEMENT OF THE PROJECT IMPLEMENTATION

Article 44.- Forms of organizing the management of the project implementation.

Depending on the specific conditions of each project, the following forms of management may be applied:

1. Direct management of the project implementation by the investor.

2. Project manager.

3. Turn-key project.

4. Self-implementation.

Article 45.- Direct management of the project implementation by the investor.

The investor shall organize the selection of and directly sign a contract with one or more consultancy organizations to carry out the survey and designing of the project, compile the dossier on bidding invitation, organize the bidding or appoint the bidder. After the investor has signed a contract with the contractor of the construction and installation, the task of supervising and managing the construction process, ensuring the implementation progress and the quality of the project shall still rest with the selected consultancy organization.

Article 46.- The manager himself directs the project.

1. The investor shall organize the selection of, and submit to the competent level for decision, the consultancy organization which will act on his/her behalf as project manager in negotiating and signing contracts with survey and designing organizations, suppliers of materials and equipment, construction and installation contractors for performing the tasks of the project implementation process, and at the same time, to assume the responsibility to supervise and manage the whole process.

2. This form shall apply only to large-scale and technically complicated projects requiring a long construction time.

Article 47.- Turn-key project.

1. The investor shall organize a bidding of the project to select a contractor (general construction contractor) to carry out the whole project (designing, purchase of materials and equipment, construction and installation...). The investor shall submit for approval the technical design, total cost estimate, test on completion and take-over only when the project is completed and put into use. The general construction contractor can subcontract to other sub-contractors the survey, designing, purchase of equipment or part of the construction and installation work.

2. This form shall apply to the construction of residential houses, civil projects and small-scale and technically simple production and business projects.

Article 48.- Self-implementation projects.

1. The investor shall himself use his available workforce to perform the construction and installation work.

2. This form shall apply only to small-scale repair and renovation projects, and particularly specialized projects (agro-forestry constructions and self-invested projects on the construction of technical and material basis by construction businesses).

Article 49.- Investment and construction consultancy organizations.

Investment and construction consultancy organizations include professional consultancy companies of different economic sectors which are set up and operate in accordance with law; research institutions, universities and intermediate construction technology schools; technical and scientific associations, construction-related and lawfully-founded arts associations having legal person status and certificates for their construction and installation consultancy qualification. Depending on their capabilities, the consultancy organizations may draw up projects (pre-feasibility and feasibility), do the designing, compile the dossier on bidding invitation, organize a bidding, supervise and manage the construction and installation process, test on completion of the project. They can also sub-contract parts of the consultancy work to other consultancy organizations.

Chapter VI

MANAGEMENT OF CONSTRUCTION COST

Article 50.- Principle for setting and managing production cost.

1. The State shall manage construction cost through the issuing of pricing policies, principles and methods of making cost estimates and the basic data (economic and technical norms, standard prices, construction unit price, portions of investment capital...) for determining the total investment capital of a project, total cost estimate of the project and the cost estimates of different construction parts of the project.

2. All projects using the State budget must compile all necessary documents on the cost estimates specifying the necessary expenses of the project. The investors and consultancy organizations must base themselves on the State regulations on the management of construction costs to compile and submit the total cost estimate and cost estimates of different construction parts to the competent level for approval and use them as a basis for considering the bidding packages using State capital. The businesses wishing to be construction contractors shall refer to the State regulations on the management of construction costs to determine their bidding prices.

3. The cost to be paid to the project shall be the cost of the winning bid and the conditions specified in the contract between the investor and construction businesses.

Article 51.- State management of construction cost.

The Ministry of Construction shall preside over and together with the concerned State agencies exercise unified management of construction cost (economic and technical norms, general unit price, standard price, consultancy fee: survey, designing, planning and construction designing) and evaluate the total cost estimates of the Group A projects using State capital.

Article 52.- Management of total cost estimate, cost estimates of construction parts of the projects using State capital.

1. The cost to be paid for the project in all forms of bidding or appointed bidding shall not exceed the approved total cost estimate of the project or cost estimates of construction parts (with regard to bidding packages). In special cases, any excess of the approved total cost estimate or cost estimates of construction parts must be examined and submitted to the agency competent to decide the investment for consideration and decision.

2. With regard to the projects designed in two steps, the cost estimates of their construction parts shall be made on the basis of the construction design approved by the agency competent to decide the investment or by the authorized agency.

Article 53.- Insurance of construction projects.

1. While carrying out investment and construction work, the investor must buy insurance for the project from an insurance company which is licensed to operate in Vietnam. Projects with foreign direct investment must buy insurance in accordance with the provisions of the Law on Foreign Investment in Vietnam.

2. The insurance cost of a project constitutes part of its investment capital. It is calculated in percentage of the value of the project.

3. The construction and installation contractors and the consultancy organizations must buy insurance for the materials and equipment, workshops in service of the insurance for labor accidents, for the civil responsibility toward the third party, for the survey and design products during the process of implementing the project. The insurance cost shall be included in the production cost.

4. The insurance conditions and the rights and obligations of the parties involved in the insurance shall be agreed upon by the parties, but must not contravene Vietnamese laws and international practices. The Ministry of Finance shall provide guidance on construction insurance

Chapter VII

INSPECTION, EXAMINATION AND HANDLING OF VIOLATIONS

Article 54.- Inspection and examination of investment and construction activities.

1. All construction and investment activities of every organization involved shall be subject to the inspection and examination by the specialized State agencies in each area of management.

2. Depending on the specific conditions of each investment project, the inspection and examination can be made in separate phases or the whole process of investment and construction.

Article 55.- Handling of the investor�s violations

1. The investor must strictly abide by the State stipulations on the management of investment projects as specified in this Regulation. Violators shall be subject to an administrative sanction, be examined for penal liability or compensation for damage, depending on the seriousness of the violation.

2. If the investor fails to fulfill his responsibility stated in the contract signed with the contractors (consultancy, purchase of equipment, construction and installation), he/she must pay to the contractors a fine for breach of the contract, pay compensation for damage, if any, and be dealt with according to Article 272 of the Civil Code.

Article 56.- Handling of violations by organizations which evaluate the project, the design, total cost estimate and final balance of accounts.

The evaluation organization shall take responsibility to the agency competent to decide the investment for the accuracy of the documents and the conclusions in its report on the evaluation results. In cases where the competent agency makes a wrong decision (resulting in accidents, waste or economic and social inefficiency) due to inaccurate documents, data and conclusions of the evaluation organization, the latter shall be subject to administrative sanctions or possible examination for penal liability; if any damage is caused, compensation must be made.

The agency competent to decide the investment which makes a wrong decision on the investment policy, thus causing serious economic, social and environmental consequences must bear responsibility before law.

Article 57.- Handling of violations by consultancy organizations, suppliers of equipment and construction and installation organizations.

1. Upon detecting that labor safety is in imminent danger or the construction organization has repeatedly violated the regulations on labor safety, the agency managing the construction or the labor safety inspector is entitled to temporarily suspend the construction.

Such temporary suspension shall be lifted after the construction organization has eliminated the danger or stopped the violation.

2. Any major technical mistakes made by the consultancy organization or the construction and installation organization, which seriously affect the quality of the project (construction), causing collapse or damage, even after the commission of the project (construction), the consultancy organization, the manager of the project design or the construction and installation organization must pay compensation for the damage and bear other legal responsibilities as provided for by law.

3. The consultancy or construction and installation organization which fails to comply with the contract in terms of quality and implementation tempo must compensate for all losses and pay a fine. The fine (excluding the compensation expenses and repair of the damage...) shall be mutually agreed upon and written in the economic contract but shall not exceed 10% of the expenditure on consultancy or 5% of the value of the damaged equipment or 5% of the value of the work volume. The fine is deducted from the after-tax profit of the unit.

Article 58.- Handling of violations by individuals.

Individuals working for the investor�s agency, consultancy organizations, suppliers of materials and equipment, construction and installation organizations and the concerned managing agencies, who violate the stipulations of this Regulation may be subject to an administrative penalty, examination for penal liability and compensation for damage, depending on the seriousness of the violation.

Chapter VIII

IMPLEMENTATION PROVISIONS

Article 59.- The Ministers, the Heads of the ministerial-level agencies, the Heads of the agencies attached to the Government, the Presidents of the People�s Committees of the provinces and cities directly under the Central Government, the Managing Boards of the State Corporations shall have to implement this Regulation.

The Ministers of Construction, Finance, Planning and Investment and the other relevant Ministers in charge of the relevant branches shall have to provide guidance, monitor and supervise the implementation according to the State management function of the Ministries.

Article 60.- This Regulation takes effect from the date of its issuing and is applicable to all economic sectors throughout the country.

On behalf of the Government

The Prime Minister

VO VAN KIET

APPENDIX

CLASSIFICATION OF INVESTMENT PROJECTS

(attached to the Regulation on the Management of Investment and Construction issued together with Decree No.42-CP of July 16, 1996 of the Government on amendments and supplements to Decree No.177-CP)

Investment projects (excluding projects with foreign direct investment) shall be classified into three groups - A, B and C - according to the following specifications:

I. Projects of Group A:

1. Security and defense projects of national secrets, projects of important political and social significance (regardless of the size of their investment capital).

2. Projects to produce toxics and explosives, exploit and process precious and rare minerals: gold, silver, gems, rare earth (regardless of the size of their investment capital).

3. Domestic BOT projects to construct infrastructure for industrial parks, urban infrastructure with an investment of 100 billion VND or more.

4. ODA projects, each capitalized at 1.5 million USD or more.

5. Non-production projects in the fields of health, culture, education, radio broadcasting, television, civil engineering, tourism, scientific research...with an investment of more than 75 billion VND (excluding main offices and buildings of the State agencies).

6. Projects with large investment capital of:

a) More than 400 billion VND with respect to the projects in the power, oil and gas, chemical, fertilizer, machine tools, cement, metallurgical and mining industries, construction of sea ports, airports and highways.

b) More than 200 billion VND with respect to the projects in irrigation, transport (except those in point a), water supply and drainage and technical construction of urban infrastructure, industrial parks, electrical techniques, electronics and informatics, machine building, material manufacturing, post and telecommunications.

II. Projects of Group B:

1. ODA funded projects (outside Group C) and BOT projects with an investment below the level defined in Item I.

2. Projects with a total investment above the level defined in Item III and below the level defined in Item I.

3. Projects in other industries not mentioned in Item I and having a total investment above the level defined in Item III.

III. Projects of group C:

1. Projects with a total investment below the level defined in the following:

a) Less than 30 billion VND with respect to the projects in the power, chemical, fertilizer, oil and gas, machine building, transport, irrigation, water supply and drainage in urban areas, construction materials, post and telecommunications industries.

b) Less than 20 billion VND with respect to the projects in the electrical techniques, electronics and informatics industries, light industries, porcelain and ceramics, glassware, paper, leather, garments, processing of agro-forestry products, aquaproducts, pharmaceuticals, medicines.

2. Projects not mentioned in points 1.a and 1.b with an investment of less than 7 billion VND.

Notes:

1. Group-A projects in railways and roads must be classified according to the road and bridge length and grades as instructed by the Ministry of Transport and Communications in consultation with the Ministry of Planning and Investment.

2. The main offices and buildings of the State agencies must conform to the governmental regulations in force.-